Small FMCG Players Sprint Ahead As Giants Grapple With Urban Slowdown
In terms of volumes, small players have seen a notable growth of 9.7% during the festive quarter driven by staples and laundry items.
Large consumer goods makers with topline exceeding Rs 5,000 crore are facing stiff competition from smaller rivals, whose sales increased roughly twice as fast during the festive quarter ended December 2024, according to NielsenIQ.
Consumer goods giants experienced a sales growth of 6.9% during the October-December 2024 period, according to the market researcher's latest quarterly report. In contrast, small players, defined as those with revenues under Rs 100 crore, achieved a growth of 14.2%, while medium-sized manufacturers, with sales between Rs 100 crore and Rs 1,000 crore, grew 13.3%.
In terms of volumes — total quantity of goods sold — small players have seen a notable growth of 9.7% during the festive quarter driven by staples and laundry items. Medium players also reported a volume increase of 8.7%. However, the giants only saw a 4.4% rise in volume.
Small regional players are outperforming their larger counterparts, who are struggling amid persistent slowdown in urban consumption. In fact, stiff competition from these regional peers have forced giants like Hindustan Unilever Ltd. to Godrej Consumer Products Ltd. to roll out cheaper packs — even for their premium offerings — as inflation-hit consumers continue to downtrade in a bid to tackle household budgets.
While the giants are seeing slower value growth, they are still growing at twice the rate compared to the preceding quarter led by price hikes.
Green Shoots
Overall, the fast-moving consumer goods industry posted double-digit sales growth of 10.6% and volume growth of 7.1% in the December quarter— its best in a year.
The growth was primarily triggered by price hikes and a festive quarter which fuelled spending on staples and snacks.
Both urban and rural showed sequential recovery. However, villages —which account for just over a third of consumer goods sales — grew twice the growth rate of the cities, according to NielsenIQ data.
"For the first time in four quarters, we have observed a combination of consumption and pricing, driving overall FMCG growth," said Roosevelt Dsouza, head of customer success – FMCG, NielsenIQ India, adding, "rural markets continued to lead the charge, outpacing urban consumption."
The October-December 2024 period marked the fourth consecutive quarter that saw rural markets outpace growth in urban India.
Companies such as Hindustan Unilever Ltd., Dabur India Ltd., Nestle India Ltd., Britannia Industries Ltd., and Godrej Consumer Products Ltd. have cited steep food and fuel inflation, along with stagnant wages, as factors contributing to the weakened demand in cities. However, a favourable monsoon season has bolstered growth in rural regions.
NIQ data suggests that volumes jumped 9.9% in rural areas, up from 5.7% in the previous quarter — double the 5% increase in urban markets. Notably, urban consumption improved from September quarter's 2.6% growth.
As consumers moved to smaller packs, the unit growth, or the number of individual units sold, stood at 8% during the quarter, higher than 3.6% in the preceding quarter, according to NIQ.
Several consumer goods companies effected price hikes in the December quarter to cope with rising commodity inflation. Firms like HUL and Godrej Consumer Products, for instance, implemented 10% price hikes in the soaps category, due to inflation in palm oil. Broadly, the industry saw a 3.3% increase in prices in the quarter, NIQ said. Companies are expected to go for another round of price hikes in the range of 2-5% in the current quarter.
Even as metro cities continued to lag and the top eight metros were hit by a slowdown, ecommerce continued to disrupt buying behaviour, Dsouza added.
